Prodigy Finance - October 30, 2019
For many, the H-1B visa is the stepping stone between the OPT extension on the F-1 visa and Green Card status.
And, while that sounds simple enough, the H-1B visa is actually quite complex, with numerous exceptions and restrictions which can also have an impact on how you go about building credit history in the US. Because credit is such an important feature of American life, the details in this article will help you prepare for a successful financial future in the US.
The current cap of new H-1B visas issued is set at 65,000 annually. In addition, another 20,000 visas are available for internationals who obtained their master’s degree in the United States from accredited institutions.
Both sets operate on a random lottery system, beginning with the visas reserved for those holding US master’s degrees. Anyone from this group who isn’t awarded an H-1B visa during this round of selection automatically flows into the second round.
To get an idea of selectivity, you should know that there were around 95,000 applicants within each pool on their own (before the first round of approvals).
However, there are typically more than 85,000 H-1B visas awarded annually. The reasons for this vary, but the two primary exceptions are:
Internationals holding at least a bachelor’s degree or its equivalent. In addition to a demonstration of expertise by the potential visa holder, the sponsoring company must also show that no US citizen or permanent resident can perform the necessary functions of the position.
You’ll have the right to work in the US on a non-immigrant visa. If you become unemployed (for any reason), you only have a limited time to secure a new position or visa before you need to leave the country.
The initial period lasts for 3 years, though this can be extended for a maximum of 6 years. However, the USCIS has recently issued permits allowing for less time, a policy which companies are fighting.
Your company must apply on your behalf and do so in April, though work can only begin in September. It’s a complicated process, but one that your sponsor deals with, not you.
Although H-1B visas are open to all qualified individuals, there are usually two groups of H-1B visa holders:
If you’re new to the US, apply for your SSN, which is the tax identification number used to report your income to the government. Keep in mind that your SSN doesn’t confer any right to work, but it does show the government you had that right at some point previously.
Having an SSN is another big part of American life as it often functions as an ID number (even though that’s not its explicit purpose) because it is unique to the individual holding it.
Once you have your SSN, everything from opening a bank account to buying a car becomes easier, though it is possible to do these without an SSN.
But, an SSN alone doesn’t open your credit and financing options. Your visa class and credit history in the US play a much bigger role.
H-1B visas in the news:
Recently, the number and benefits of the H-1B visa programme have been a topic for public discussion in the US. There are both supporters and detractors.
As it’s a process to get an H-1B visa for an international employee, most companies reserve their applications only for qualified individuals and skilled positions.
While there have been cases of abuse of the system, it’s unclear whether they are widespread. This speculation has led to investigations which may or may not lead to increasing restrictions on the H-1B visa programme.
Any substantial changes to its structures, numbers or policies remains under the control of the US congress, though the findings of other branches of government can play a role.
Although you may be able to remain in the US for up to 6 years on an H-1B visa, at some point your passport will expire.
Because of this, most lenders won’t be able to provide the same credit opportunities that are available to US citizens.
That’s not to say, of course, that you can’t get credit and start building your credit profile, only that you won’t have the full spread available.
Here’s what you should know about building credit while on an H-1B visa:
Challenge: You don’t have any credit history when you enter the country. Banks are often reluctant to lend money to non-permanent residents, especially when they are not customers.
Opportunity: In addition to depositing your salary and handling the bills, a US bank account is essentially the first step to developing your US credit profile. If you don’t already have a bank account in the United States, this will definitely be one of the first things you handle when you enter the country on your H-1B visa.
Maintaining an account in good standing gives your bank reason to trust you when you’re looking for credit in the future (it’s not the only thing they will consider, but it certainly helps).
To open a US bank account, you’ll need:
Each bank has its own set of criteria for opening accounts — and they have their own terms for both checking and savings accounts. Take time to find a bank account with terms that best reflect how you’ll use the account.
TIP: In the US, you’ll find that some banks operate regionally while others are nationwide.
Regional or local banks typically offer lower fee structures and often have a little more flexibility in terms of loans and credit products. But if you’re considering relocation to another state, you may want to consider a national bank.
Challenge: Regardless of the length of time you’ve been developing your local financial history in the US, you’re not going to have the full range of credit products available to you that are available to citizens. Credit products you may have difficulty obtaining are mortgages and other long-term loans.
You’ll still want to aggressively build your credit profile if you have any intention of pursuing an immigrant visa (such as a Green Card) in the future. To say that credit is central to the American way of life is almost an understatement.
Opportunities: There are a number of ways to do this, many of which will make your life easier while you’re in the US, even if you don’t plan on remaining in the country.
Challenge: Most US lenders and banks will be limited by the expiration date of your current visa. Because of this, you will find it difficult to receive approval for long-term credit opportunities that extend past this time frame.
Opoortunity: You may be eligible for short-term credit via in-store, secured and unsecured credit cards or through short-term auto and personal loans. More on these below.
Challenge: If you’re totally new to the US, you’re not going to be offered a standard credit card straight away.
Opportunity: Because credit is so important in the US, you’ll want to explore obtaining a credit card in order to begin building a strong credit score. Here are a few options you may wish to investigate:
TIP: Having a good credit score and history is the key to obtaining financing for big ticket items in the future. Scores range between 300 and 850 in the US, and you’ll want to strive for a score over 700.
Accessing your credit reports is relatively easy and you’re entitled to a free credit report annually. If you have any questions about how to access your credit report, inquire with your bank.
Challenge: You may be eligible for a personal loan, but you will be limited to credit that you can repay by the time your current visa expires.
Opportunity: A personal loan can be useful for an emergency or a necessary purchase, but keep in mind they often carry higher interest rates than secured loans (such as a car loan). If you need a personal loan on a H-1B visa, make sure to shop around. A great place to begin is your local bank.
Challenge: Due to time restraints of your visa, you won’t be able to secure a typical home loan that lasts between 20 and 30 years. Long-term car loans may also be more difficult to obtain.
Opportunity: You could potentially secure a small home loan if you have almost the full purchase amount in cash. This, however, is an unlikely scenario for most H-1B visa holders, so you’ll probably need to rent your home during this time. On the plus side, renting your home is a great way to build your credit history.
Auto loans are easier to secure on an H-1B visa than an OPT extension of the F-1 visa. However, you still won’t have the full range of options available to American citizens or permanent residents, and the repayment terms for a car loan will need to fall within the time provided for by your visa. Also keep the following in mind:
The H-1B visa is valid for up to a maximum of 6 years.
Many internationals who got their masters in the US have also used up the OPT extension on their F-1 visa. If this is the case, then it’s time to start considering long-term options.
While there are many possibilities, you’ll first need to determine whether your goals include returning to your home country or not. If not, it’s time to start thinking about obtaining a Green Card, and depending on how long you’ve lived in the US, whether citizenship is the route you plan to take.
No matter what your decision, building your credit while on an H-1B visa will make your financial life easier while in the US.
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This blog is merely informative, is not directed at any particular reader and does not constitute financial or credit related advice. Readers are encouraged to do their own research on financial and credit products and on the institutions offering these products, and to consult a financial advisor before applying for and taking up credit.
Post updated for accuracy and freshness on October 30, 2019. Originally published on December 13, 2018.
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